Real Estate

The Demand for Quality in the Office Sector

Chart

Mar 15, 2023

demand-for-quality-chart

In our recent Real Assets Quarterly, we highlighted how we believe demand for high-quality assets has never been higher, with “demand for quality” one of the five investment themes we see creating real asset opportunities in 2023. The chart above shows this demand for quality in the office sector. Newer (or higher-quality) buildings have been experiencing much higher net absorption—the net change in physical occupancy—since the onset of the COVID-19 pandemic, even as the sector overall has simultaneously been under pressure.

Newer buildings tend to be higher quality due to their energy efficiency, high-tech amenities and other state-of the-art features, and may represent a bright spot in the sector. We recognize that the office sector is facing lingering uncertainty around the return-to-office trend; however, we believe contrarian managers recognize that attractive opportunities may be found where others aren’t looking.

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